Bitcoin plummets: more than 100,000 people are liquidated

On the second day of the listing of the spot Bitcoin ETF, digital currencies were once again sold off. Bitcoin once fell below $42,000 per coin, with a daily drop of more than 7% to $42,562.1 per coin.

Spot Bitcoin ETFs generally fell by about 6%. Among them, DEFI fell by more than 6.6%, FBTC fell by 6.4%, HODL and BRRR fell by 6%, BTCO fell by 5.9%, and BITO fell by 5.9%.

Blockchain concept stocks generally fell sharply. Among them, Ebang International ADR fell 13.6%, Hut 8 fell 10.7%, The 9 ADR fell 10.2%, MicroStrategy Investment fell 8.5%, Canaan Technology ADR fell 8.3%, Riot Platforms fell 7.4%, digital currency exchange Coinbase fell 6.2%, and popular brokerage Robinhood fell 5.3%.

According to the Securities Times, CoinGlass data showed that as of the morning of January 13th, Beijing time, more than 100,000 investors had their positions liquidated in the entire cryptocurrency market within 24 hours, with a total liquidation amount of US$342 million (approximately RMB 2.45 billion).

Bitcoin "bungee jumps" the day after ETF listing

The U.S. Securities and Exchange Commission (SEC) approved on Wednesday that the first batch of spot Bitcoins will be listed and traded on Thursday, January 11. Bitcoin fluctuated sharply throughout the day.

On Thursday morning, Eastern Time, Bitcoin rose above $49,000, a new high since December 2021, and rose about 6.8% on the day. However, the enthusiasm soon subsided, and Bitcoin fell on the day, returning to below $46,000. Related ETFs also fell accordingly.

After the Bitcoin spot ETF was listed in the United States, South Korea's financial regulator made an official response, warning domestic securities firms that engaging in any brokerage activities for foreign-listed Bitcoin spot ETFs may be illegal.

Bitcoin accelerated its decline after the opening of the U.S. stock market on Friday, falling below $44,000 during the session, down more than $5,000 from the two-year high set on Thursday, the first day of the ETF listing, wiping out the gains brought by the optimism of the ETF listing in the first few days of this week. Currently, Bitcoin has fallen by more than 7% to $42,562.1 per coin.

Two consecutive days of poor performance caused heavy losses for investors who rushed into Bitcoin on the first day of its listing. According to BlackRock's ETF, if $10,000 was invested on Thursday, only $8,300 would be left on Friday.

Why did it fall so sharply? What is the future of Bitcoin?

Peter Schiff, a well-known American financial commentator, said:

The sell-off in Bitcoin, Bitcoin ETFs, and other Bitcoin-related stocks has been surprisingly orderly so far. I wonder when the sell-off will become more aggressive.

From the data of fund flows, in addition to people directly selling bitcoins to cash out, the competition among bitcoin ETFs is also extremely fierce. Funds are transferred from ETFs with high fees to those with low fees:

Although nearly half of the Bitcoin ETF's trading volume yesterday came from the Grayscale ETF, making this Grayscale ETF the third most traded ETF on record, trading volume does not represent the inflow/outflow of investors' funds. In fact, the funds of this Grayscale ETF are flowing out.

As the Wall Street Journal website mentioned before, after the initial launch promotion period of the fund, Bitwise's BITB only charged a fee of 0.20%, the lowest among all ETFs, and had the largest inflow of funds. The remaining ETFs also had varying degrees of net inflow of funds.

In fact, Bitcoin has performed poorly in the past two days, with a bit of a "sell the fact" approach, which is not surprising to some people.

Analysts have warned earlier that the market's excitement may be premature. Although the US SEC has approved the launch of a Bitcoin spot ETF, the investment community still believes that cryptocurrencies pose risks. Scandals such as the collapse of the cryptocurrency exchange FTX in 2022 have raised investors' vigilance.

CryptoQuant, an encryption data service provider, said last month that the long-awaited approval of the Bitcoin spot ETF will trigger a sell-off, as Bitcoin has risen by more than 60% in the past three months and the market has already digested this big positive. After the spot ETF is approved, Bitcoin is expected to pull back to $32,000 next month.

The reason why Bitcoin fell again is that many institutions have not yet entered the market. Considering the investment risks of Bitcoin itself, other large institutions such as Vanguard, Goldman Sachs, and Bank of America will not join the battle for the time being. Before different institutions purchase these ETFs, due diligence review and platform approval take time.

In addition, although the US SEC has "surrendered and compromised", not all trading platforms can trade these Bitcoin ETFs. Part of the reason may be that these funds have not yet been approved by the compliance department of the brokerage. According to reports, a representative of Citi said that the bank is evaluating products for retail investors. The famous Vanguard is no exception. Yesterday, some netizens couldn't help but said that they transferred the money in their pension from Vanguard to Fidelity just to buy Bitcoin ETFs.

But on the other hand, some investors pointed out that since there are not many institutions in the market at present, and there are some market participants who want to buy but cannot, this means that the potential scale of incremental funds in the future is large. If more institutions join in the future, it may trigger a new round of long-lasting market conditions.